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Capital Gains Tax in Tennessee
By Priya Raman
The Hall Tax is gone, and so is any state bite on gains.
The Hall Tax is gone, and so is any state bite on gains.
Tennessee used to tax investment income separately under the Hall Tax, but that was phased out fully by 2021. What's left for a property seller today is the federal rate alone: up to 23.8%, combining the 20% long-term rate with the 3.8% NIIT.
With no state income tax to worry about, a 1031 exchange in Tennessee is a straightforward federal deferral: reinvest the proceeds into a like-kind property and the 23.8% doesn't come due. Tennessee doesn't add its own rules on top of the federal exchange process. Work the numbers in the 1031 exchange calculator, and keep the 45-day identification window and 180-day close from the timeline calculator on your calendar.
That 23.8% ceiling is entirely federal at this point, split between the 20% long-term capital gains rate and the 3.8% net investment income tax for higher earners. Tennessee's exit from the Hall Tax means there's no state-level number to add. Estimate the exact federal liability, recapture included, in the capital gains tax calculator.
A Tennessee seller who reinvests the full proceeds through a 1031 exchange owes none of the amount above until a later sale without exchanging. Confirm your own Tennessee deadlines with the timeline calculator.